Q3. List of activity ratios
What are the key financial ratios that can be used to analyze the activity of an entity?
A3.
Activity ratios are calculated as follows:
(1) Assets turnover ratio
= Sales / Average total assets
(2) Inventory turnover ratio
= Cost of goods sold / Average inventory
(3) Accounts receivable turnover ratio
= Credit sales / Average accounts receivable
(4) Accounts payable turnover ratio
= Credit purchases / Average accounts payable